SEC Releases Additional Guidance for Executive Pay Ratio Disclosures

Yesterday, the SEC published interpretive guidance to help companies comply with the executive pay ratio disclosure requirements (mandated under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act). The pay ratio requirement forces companies to begin disclosing pay ratio information in early 2018.

SEC Chairman Jay Clayton said: “It’s our priority to make sure that we implement disclosure rules mandated by Congress in a way that is true to the mandate and, to the extent practicable, allows companies to use operational data and otherwise readily available information to produce the disclosures,” said Chairman Jay Clayton. “Today’s guidance on pay ratio reflects the feedback the SEC has received and encourages companies to use the flexibility incorporated in our prior rulemaking to reduce costs of compliance.”

In particular, the guidance:

States the Commission’s views on the use of reasonable estimates, assumptions and methodologies, and statistical sampling permitted by the rule

Clarifies that a company may use appropriate existing internal records, such as tax or payroll records, in determinations about the inclusion of non-U.S. employees and in identifying the median employee

Provides guidance as to when a company may use widely recognized tests to determine whether its workers are employees for purposes of the rule

The goal, as stated by Bill Hinman, Director of the Division of Corporation Finance, is "intended to assist companies with their compliance efforts and reduce the costs associated with preparing disclosures."

Toppan Vintage is here to answer questions and guide our clients through successful completion of these new disclosure requirements. Changing regulations are reflective of the constantly updating and fluctuating regulatory rules imposed by governing bodies all over the world. To keep up with changes in regulation requirements regarding pay ratio, companies are encouraged to reach out to their service providers whose SEC experts are indispensable when finding cost-effective, efficient ways to prepare new disclosures.

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